Retail is the second largest contributor to India's GDP. However, it is largely dominated by independent, family run stores. Several new domestic players and a few international players have entered the Indian retail market and the market is set to witness transformational changes. So, what does this mean to an entrepreneur in India today?

Excerpts from an interesting discussion:

Bijou Kurien President and Chief Executive of Lifestyle Division of Reliance Retail.

Retail is a hot topic these days. It's the 2nd largest contributor to the Indian GDP, but most of it is unorganized and run by small entrepreneurs who own mom and pop shops. There are very few large companies in India that are trying to capture the big opportunity in India. There are about 12 million stores, in India which do about 96% of turnover in India, where retail is worth 330$ billion. Retail is growing at 8 to 10%, which is in line with India's GDP growth.  At the current rate of growth, retail industry will grow from 330 billion today to 625 billion in 2015.

Retail consumption in India is constrained by lesser number of outlets and the large retailers are not enticing enough. For example, look at what happened to the mobile phones industry & four wheeler industry.

There is also a huge change in the consumer. They are younger, more modern, come from a nuclear family and are in many cases working women. People today are aware of world news, have access to TV, are reading more and are a richer consumer today. We have a change in landscape too. Infrastructure is the key element of growth, and a lot of retail companies today are creating malls, which are great opportunities for new stores.

One of the constraints is on the supply side, of products or brand services in the retail store. Once we have more products, there is a greater incentive, or pressure on consumer, to choose and buy something. We have a huge opportunity to increase brands and products in the Indian market.

On the demand side in terms of accessibility and central location, we need to ensure we create the right ambience. Any entrepreneur has to remember that several things go behind making a store look good, such as space, design and miscellaneous services such as scientific use of power, AC, lighting and security cameras, which are mostly in the nascent stage in India. Retail companies need to induct the right talent, by training them. An entrepreneur has to also ensure that there is a high level of service at the store. Not many people in India can ensure that kind of quality.

Ashish Dikshit, President, Madura Garments.

Who are the people involved in retail? They come from a variety of industries, some from BPO and others from random industries. Hence there are a lot of semi skilled professionals in the industry. This is a challenge at a time when consumer expectation is getting sharper.

From a franchising perspective, there are many opportunities for people to explore. In the early days brand experience was a simple concept, but today the retail brand journey has become far more complex.

People jump into retail with only one intention: to make money. Though, it does serve its purpose, it really is fundamentally staring off on a wrong note. People with a single minded investment approach often tend to struggle in retail. They have not looked at the fundamentals of what makes a great retailer.

As a franchisee, an entrepreneur can bring various benefits to the table, such as local taste and local knowledge. He also will know a lot about location and be able to better understand the dynamics of the city.

In the retail industry the average job span is for 6 to 9 months. The average interest level is bleak for a front end retail guy, and he gets bored fast. The franchise has to ensure he has a way to provide continuity and growth prospects for the employee.

The sheer explosion of retail in India is so visible. There are 2 things that retailers want

1. People

2. Space

When it comes to training in the retail industry, the first thing we need to focus on is the product knowledge. The 2nd thing is that as Indians, selling does not come to us easily and therefore the buyer believes he has the upper hand. When it comes to selling Indians are defensive by nature, which should change.

Its very important for a retailer to create the right kind of "buying environment" and not a "selling environment".

Pranab Barua, Advisor to Mr. K M Birla for Aditya Birla Retail Ltd, one of the largest Retail initiatives in the country. 

The key point is that whilst both organized and unorganized market is growing, both of them will coexist side by side in the coming 50 years or more. Unorganized trade will also continue to grow, inspite of large players coming into the market.
Why is penetration so low as of today? Last year, all the big players combined launched no more than 1000 stores in total. This is a very low number, considering we have 12 million mom and pop stores in the country.

The key levers of the retail industry are real estate, buying and merchandising, supply chain, IT and people store management.

When it comes to real estate location, store design and look is a major challenge to the modern retailer.

When it comes to buying and merchandising there are huge opportunities in vendor development, private label, co branding, sourcing aggregation and import aggregation.  Retail of food has very low margins, and you need deep pockets to get started.

When it comes to supply chain management, we have to consider warehousing issues, transportation, home delivery, credit management, back office integration. Managing distribution centers is a business opportunity which we can do on behalf of big retailers. Home delivery is a key issue for the modern retailer, since the kirana store owner knows the customer personally and does home delivery. More retailers should offer free home delivery, which will attract more customers to them.

A key aspect of IT in retail is that of inventory management. A modern retailer needs a central IT system to manage huge number of stores across the country. He also needs to monitor performance on a constant basis.

Subhabrata Ghosh, President and CEO of Celsius100, the management consulting company of Saatchi & Saatchi Worldwide. 

Who creates an opportunity? You! If there is a mall and if "YOU" don't go, then there is no business. In this case, "YOU" stands for the customer. Remember a fundamental truth in life: "Business starts with consumers"

People think that the only way to attract customers is by lowering the price. Every retailer is lowering the price today. Why are you in business, if your only objective is to lower business? You can't survive in retail if you constantly lower prices. The traditional thinking is that, nothing gets people moving that four letter words such as "sale" or "free".

Imagine if you were the customer. What will make you come back to a particular retailer?

Remember 3 key points which are vital for every retailer to understand thoroughly

* Insights

* Inspiration

* Ideas

Consider the example of Apple computers. They use a combination of design, technology and synergy to create such fantastic inventions. They turn retail on its head. Once you are in the Apple retail outlet you are made to feel like Alice In Wonderland. The great thing is that Steve Jobs creates a show in the store, but all the stuff he uses to create the show is the same stuff that he sells.

What is the difference in the retail strategy of Apple stores compared to that of its rival, say BestBuy. There are 3 major factors for this

* Power Of Mystery & Curiosity

* Power Of Intimacy

* Create Experiences For People In The Store

New age stores use new technologies to engage the senses of a human. For instance look at the Lexus, which uses a hologram in its stores to showcase the car using the FreeFormat technology. This encourages consumers to enter the store and have fun with the technology.

I would like to call it the rule of "366 opportunities", since there is lots of opportunity to be creative.

So if you plan to start a retail business, learn to start it with your customers. Here are the mall rat's magic questions for every retailer.

* What is the behavior you notice that gives you business?

* Why do they behave that way?

* How are u going to create PIC (Permanently Infatuated Customers)?

These were excerpts from an event organized by TiE- Bangalore chapter called ‘Retail - The Big Indian Opportunity'. 

Compiled by consulting correspondent Mr. Rajiv Mathew.

Issue BG86 May 08

Related Items:

---

Be first to comment this article

Only registered users can write comments.
Please login or register.